The Most Important Thing: An Interview With Howard Marks

Oliver Mihaljevic, who is running the upcoming European Investing Congress, was recently able to secure an interview with Howard Marks, the CEO of Oaktree Capital Group LLC (NYSE:OAK) (Howar Marks will be speaking at the event). This interview covers a wide range of topics and gives rare insight into Marks’ extremely talented investing methods.

Marks discussed his book, “The Most Important Thing“, which has received accolades from the likes of Warren Buffett. Joel Greenblatt also termed this book as a future investment classic. When asked about his motivation for writing the book, Marks responded that he really couldn’t remember. He spoke of how he had written memos for over ten years to his clients, and never received any response to them. However, he was determined to document his thoughts, and he continued to write them down.

He explains that on New Years Day of 2000, he wrote a memo, which he titled Bubble.com. This one proved to be very special, as it talked about the tech sector being a bubble, and it was soon proved to be correct. After ten years of hard work, Howard marks was as he termed it, “an overnight success.” He explains that he had planned on documenting these memos in a book, which he had decided to release when he retired. However, those plans were interrupted when he received a letter from Warren Buffett. Buffett said in his letter, “If you will write a book, I will give you a blurb for the jacket.” Marks admits that the request from Buffett was the catalyst that made him begin putting his thoughts into book form.

Marks explains in the book that he doesn’t believe that many investors understand how to choose their investments wisely. He explains that too many people try to simplify investing, while he seeks to do the opposite. He wants to show just how complicated a process is involved in selecting a stock, and deciding how much of that stock to buy.

When asked about how general consensus influenced market decisions, Marks replied that, “First of all, the consensus has an opinion, and you have to understand that the consensus is not a moron. So, much of the time, the consensus is about right.” He further explains that in order to do better than the consensus, you must determine when the consensus is wrong. You have to think differently than others around you.

When asked how he decided which stocks and bonds to invest in, and what his model was for choosing these investments, Howard Marks’ reply is definitely not the norm on Wall Street. He said that he stresses the dangers of being overly confident. He also points out that his book contains the models upon which his company is based, and that “it is not an algorithm. It is a mindset.” In other words, while they do use algorithms to help select their investments, once they’ve made the investment, there’s no turning back.

When asked about risk management, Marks’ explained that just because a stock is a “favorite”, and should be a good safe investment, that doesn’t mean that it’s the best one to make, in terms of profit. He explains that you have to be able to asses the risk very carefully. After deciding whether the risk is worth the return, then you make your investment.

Howard Marks took Oaktree Capital Group LLC (NYSE:OAK) public in June of 2011, and the company has flourished ever since then. He is a philanthropist of sorts, like many of his peers. His donations include the Marks Writing Center, which makes it possible for University of Pennsylvania students to receive one on one attention, which Howard credits for his abilities to write. You can find more of his written work in “The gathering Storm”, which is a collection of essays by leading hedge fund experts. The proceeds from sales of “The Gathering Storm” are donated to various charities, including the Marks Writing Center.